BA and Iberia owner makes €500m loss amid company shakeup

Exceptional items related to painful restructuring at Spanish carrier Iberia take toll on group's profit, but BA profits are up

Iberia plane waits to take off. International Airlines Group, formed from a merger of the two airlines in 2011, made a pre-tax loss of €506m in the six months to June 30 following one-off costs from an overhaul which has so far seen the loss of 1,700 Iberia staff. Photograph: Steve Parsons/PA

The owner of British Airways has posted another big loss but insists a painful restructuring at the Spanish carrier Iberia is starting to pay off.

International Airlines Group (IAG), formed from a merger of the two airlines in 2011, made a pre-tax loss of €506m (£442m) in the six months to 30 June following one-off costs from an overhaul which has so far seen the loss of 1,700 Iberia staff.

But excluding the exceptional items, losses reduced to €33m from €253m a year earlier as Iberia bucked 11 quarters of deteriorating trading to post improved losses of €35m for the last three months.

British Airways also improved, with operating profits up to €247m in the three months, from €94m, as the London market and transatlantic traffic remained strong.

IAG's chief executive, Willie Walsh, said the benefits of Iberia's restructuring were "beginning to show". IAG is in the process of cutting Iberia's capacity by 15%, slashing pay by up to 18% for flight and cabin crew and axing 3,100 Iberia jobs, although its turnaround battle has been tested by Spain's flagging economy.

Shares opened more than 3% higher as the group's operating profit of €245m for the last quarter came in well ahead of City expectations, helped by a 3.7% drop in fuel costs for the half year.

The Cantor Fitzgerald transport analyst Robin Byde said the airline had produced "strong numbers with a good turnaround at Iberia supported by positive trading at BA".

Shares in IAG, which have risen 57% so far this year, closed at 297.1 pence on Thursday, valuing the group at around €5.4bn. Shares in IAG rose 2.9% to 305.6p in early trading.